RG Ltd. had an authorised equity capital of ₹20 lakh divided into shares of ₹100 each. The paid-up capital was ₹12,50,000. Besides this, the company had 9% Redeemable Cumulative Preference Shares of ₹10 each for ₹2,50,00

In the books of RG Ltd (Journal) Particulars Dr. (₹) Cr. (₹) Bank A/c 31,500 Profit & Loss A/c 2,500 To Investment A/c 34,000 (Being the sale of investment for ₹31,500 i.e. ₹30,000 * 105% loss debited to P & L A/c) Bank A/c 1,32,000 To Equity Share Application A/c 1,32,000 (Being application money received on 1200 equity shares @ ₹110 each) Equity Share Application A/c 1,32,000 To Equity Share Capital A/c 1,20,000 To Securities Premium A/c 12,000 (Being issue of 1200 equity share of ₹100 each fully paid at a premium of 10%) 9% Redeemable Cum. Preference Share Capital A/c 2,50,000 Premium on Redemption of Preference Shares A/c 25,000 To Preference Shareholders A/c 2,75,000 (Being the amount payable on redemption transferred to shareholders A/c) Preference Shareholders A/c 2,72,250 To Bank A/c 2,72,250 (Being the amount payable to preference shareholders holding 24,750 shares) General Reserve A/c (W. No. 1) 1,30,000 To Capital Redemption Reserve A/c 1,30,000 (Being the amount transferred to Capital Redemption Reserve account) Securities Premium A/c 25,000 To Premium on redemption of preference shares A/c 25,000 (Being premium payable on redemption of preference shares charged to profit and loss account) Capital Redemption Reserve A/c 1,30,000 Securities Premium A/c (28000 + 12000 - 25000) 15,000 Profit and Loss A/c (72000 - 2500) 69,500 General Reserve A/c 1,28,000 To Bonus to Equity Shareholder's A/c 3,42,500 (Being the bonus dividend payable in the ratio of 4:1 to the holders of 13700 shares) Bonus to Equity Shareholders A/c 3,42,500 To Equity Share Capital A/c 3,42,500 (Being the issue of bonus shares to existing shareholders in the ratio of 4:1) Working Note: Amount to be transferred to Capital Redemption Reserve Account: Face value of shares to be redeemed: ₹2,50,000 Less: Face value of shares newly issued (Excluding Premium): ₹1,20,000 Total: ₹1,30,000 Note: There are no sufficient profits / free reserves to issue bonus shares in the ratio of 4:1 which means 4 bonus shares for every one share held. Therefore, question has been solved assuming bonus in the ratio of 1:4 i.e. 1 bonus shares for every 4 share held. Further, it can be mentioned that there is no sufficient profit/ free reserves to issue bonus in the ratio of 4:1, therefore, such issue cannot be made.